Worried about China's economic growth stall? There is a new reason: because inventory level is higher, if demand go soft words, production falls may also be faster.

Inventory cycle manufacturing output will magnify the ups and downs. Strong demand, an enterprise to increase production, and increase inventories to bring further boost economic growth. When demand is weak, the enterprise reduce production and gradually sell inventory, by a further blow to economic growth.

By the end of 2008 during a global recession, demand plunged make enterprise stop the production and sell inventory, adding to the world economic crisis. When economic growth back on track in 2009, when the supplement and make growth stock further boost.

In China, this process is the same, but reliable inventory data than in any other country harder to find. It's been shown inventory level is higher, if the next few months terminal slowing demand for high inventory, production caused blow.

China Federation of Logistics &purchasing (Logistics and Purchasing of China within 3 to 4) data shows in manufacturing finished inventory increase. This is not normal, because the data is generally display inventory decline. UBS (UBS) China economist katus ha calculations suggest that key departments of industry is already close to inventory sale before the crisis levels.

Inventory added reflects the ample liquidity in the manufacturing sector in China and the strength of the economic recovery of faith. Trouble is, if now demand falls, producers measures will be reduce inventory, which pose a double whammy for production.

Demand prospects unpredictable, but have reason to worry. The industrial sector (in April reflecting China's industrial production status of the most concern year-on-year growth rate, already index) from march down to 13.4% at 14.8%. As a key source of steel demand production of cars, their rate of decline and fall with sales to 1.6%. Real estate investment is still strong, but is widely expected to building activities will because the government control, oversupply and reduced.

Variable is inflation. If consumer price index rising, so the government can no longer slowing tightening monetary policy, then economic growth should will rebound to inventory cycle concerns, will be weakened. But if inflation remains high, policy remains tight, China's economic growth slowed in the next few months if words, most likely because of high inventory and aggravate.

Source "Chinese textile nets"

Edit: lara